All along company was publishing/disclosing only current FY order book numbers. Good to know long term details as well. However, would like to see how this multi year order book builds further to address full year capacity and sales run rate.

Other encouraging developments/plans/points from concall* B2C foray/promotions* Getting Indian NGOs inquiries for FC * Have bid for Govt of India tender too...although partially size based on capacity company can space for this. * South Africa tender coming up for renewal with additional 40% order size than earlier and company already in discussions* Cautious on cash spend on capex. Will spend on capex only after confirming demand robustness * USFDA approval initiated for FC. It is costly and lengthy process - take 12-18 months and 15 to 20 cr expected capex for this. This will open market - US and US aid – procurement agency for US govt and it will open their business in Africa for us.

Adding some more inputs from today's call:a) Out of 80cr govt of India tender they have done bid for 15 crore .They are expecting the approval/rejection of this bid within two weeks .Based on company current FY17 commitment for booked order they can only bid for 15 crore amount .

b) With existing cash of close to 17 crore they are looking for acquisition(ticket size 15 to 20 crore) or some organic growth by introducing new products .Mr Garg clearly told that he is not in favor of taking loan and doing big ticket size acquisition .He wants company to be debt free .

c) There are many orders which will auto renew in next financial year and will add to the existing order book of 40 crore .South African tender when they come for renewal in next financial year ,order book size will be 50% more than the order which they received last time .He seems quite confident of order renewal from south Africa .

d) New Lubricant jelly can contribute 7 crore to topline of Fy18 if they get enough order for it .For FY17 second half out of 46 crore pending order to execute, 2 crore contribution is from Lubricant jelly .

e) Q3 and Q4 result will be close to or better than what company delivered in Q2.

f) Many International NGOs tender bidding will happen in Q4 .

g) Currently they are at 90% capacity utilization .Capacity for female condoms can be increased from 20 million to 30 million in span of 2 months and from 20 to 40 million in span of 4 to 6 months .They will need capex of 3 crore to double there capacity .

h) They are also actively looking for outsourcing there male condom production if demand for it spikes .

Overall quite positive vibe came out from management commentary ..I expect FY17 topline in between 85-90cr and EPS of entire year somewhere around 19 .

I met a senior person in the condoms business recently and he said women's contraceptives is a fast growing market given concerns on premarital sex, one night flings etc. and he said it would take 2-3 years to get approvals and start exporting and most guys in India have missed this because of the lack of cultural understanding. He also said this is a white space globally and this could lead to acquisitions in the future. seems like cupid has a decent moat -

discl invested at an avg price of 240-250. no transactions in the last 3 months.

Business:Cupid, an Indian Public Limited company headquartered in Nashik (India), manufactures male, female condoms and Lubricant Jelly. It supplies condoms on contract for other brand and has its own brand.

It's 20% of revenue come from the Contract manufacturing and 80% from the own brands. Both Male and Female condoms contribute 50% each to the revenue. Lubricant Jelly is a new product launched last year. Its customers include both Individuals and NGOs like UNFPA, WHO, NDOH (South Africa), etc.

Company is having the marketing offices in Delhi, Mumbai and New York marketing its products to 26 countries including South African and Sub-Saharan Countries where 70% of HIV population lives. Exports contribute to 77% of revenue out of which South Africa and sub-Saharan countries have a major share. Female Condoms biggest customers are Institutional customers & Female Condoms have higher margin than Male condoms. Cupid is the first company in India and the second one in the World to have been prequalified by WHO/UNFPA for worldwide public distribution of female condoms

Past Numbers:

Growth in Op. Earnings/ Diluted Shares - 46%

ROIC (Op. Income/ Avg. IC) - 69%

Growth in FCF/ Diluted Shares - 45%

FCF/IC - 37%

Growth in Book value/ Diluted Shares - 38%

Liabilities/ Equity - 34%

Growth in Tangible Book/ Diluted Shares - 37%

Debt/ Equity - 2%

Strategic Analysis of Future Performance:1. Four Forces: 1. Threat of new entrant - Medium - It is difficult for new entrants to develop their own products and to get it qualified by Local and International bodies. Moreover, female condom is a patented product. 2. Bargain power of buyers - Low - Since the company manufactures niche products and people would get used to the product (habit forming demand side moat), they would pay an extra cent for the product they like. (Especially for female condoms). But for the past two years, the receivables are on increasing trend; probably to establish and strengthen the institutional customer’s relationship, they might have increased the sales in credit. Anyways the institutional customers are renowned organizations. However, they have balanced that increase in receivables with reduction in the inventory to stabilize the net trade cycle. 3. Threat of substitutes - Low - Unlikely to dislodge these products from the market. Although other methods of contraceptive methods have come, condoms will continue to be the prime choice for the customers to prevent unintended pregnancies or Sexually transmitted disease. 4. Bargain power of Suppliers - Low - Company might get many suppliers to supply the raw materials for their products. Days Payables is on increasing trend (always greater than the inventory), suggests that the company can delay the payment to the suppliers, thereby maintaining a negative net trade cycle. This prevents the company from borrowing for working capital, which results in high ROIC.

2. Breadth Analysis:The Customer/Supplier Base is unlikely to consolidate. Moreover the company is expanding its geographical areas.3. Moat Identification:Sources of Moat:  Ingrainedness - Female Condom is manufactured by only 4 companies worldwide. This company has become an integral part of value chain when it comes to female condoms.  Supply side moat - Female condom is patented (pending) and pre-qualified by the UNFPA and WHO.  Capacity Utilization improved from 52% in FY14-15 to 64% in FY15-16. This increases the asset turnover too. There will not be Capex requirement in the near future.  Cupid plans to enter new Geographies: South America, Eastern Europe and CIS countries and add new products and increase the Brand promotion. This could probably contribute to the topline.

Market Growth Assessment:Global contraceptives market size is poised to touch USD 33.6 billion in revenue by 2023. Market is currently estimated at USD 19.8 billion and is projected to increase at 6.8% CAGR over the coming years. It is estimated that the global market for male condoms would touch USD 9.3 billion by the year 2020. While the male condoms market would demonstrate a growth from annual 27 billion units to 42 billion units, the female condom market would also expand from the current annual 100 million units to about 340 million units by 2020.

Shareholder Friendly:1. Dividends - 20% healthy dividend payout2. Buybacks - No3. Reasonable Compensation to management 1. Chairman & Managing Director - INR 6 Million per year + Commission of 1% Net profit of the Company 2. Other Directors - INR 0.3 Million 3. Other key Personnel other than Managing Director = INR 0.78 Million All these remunerations are below the ceiling set by the Companies Act, 2013. This is the first year Chairman is getting remuneration, until previous year he didn’t get any remuneration. 4. Avoiding Related party Transactions within the Management. - Loans with promoter group.

Points of concern:

Too much dependence on the institutional orders like Government of India, UNFPA, NDOH South Africa etc. We cannot assume that the company will get same revenue (or repeated orders) from these clients. In FY 2013-14, revenue reduced because it didn't receive the orders from GOI, New Delhi.

Company formed a subsidiary "Cupid Medical" in 2013 and ceased in 2015. No big revenue push from this subsidiary. Why this was formed?

Company lends Loans to too many people in the promoter group in the past.

Company invested in Arihantsidh Properties pvt Ltd as Non-Current Investment for Rs 24 Lakhs. Also it mentioned the investment value got diminished by Rs 18 Lakhs, leaving the net investment to Rs 6 Lakhs. What is this investment? Why is it reducing in the value?

In the past, company issued warrants to fund its working capital, till the introduction of Female condoms.

Till the introduction of the female condoms in 2012-13, company was struggling without any significant movements. Female condom was the savior of the company. But still the company supplies the female condoms predominantly to the institutional customers like NGOs. How long the company can depend on the business with the NGOs is the question, an investor must try to figure out. (Note: Female condoms contribute to half of the revenue with good margins)

Cupid's stated intention for foraying into the retail segment , along with fund raising via issue of securities, seems a bullish signal from the management.Might this be a strategic shift away from government tenders ?Or is the company gearing up for some acquisitions ?[http://www.bseindia.com/corporates/anndet_new.aspx?newsid=92cc0e30-8daa-4cf7-a8ab-355105c4b830](http://www.bseindia.com/corporates/anndet_new.aspx?newsid=92cc0e30-8daa-4cf7-a8ab-355105c4b830)

In response to some query, Management had mentioned sometime back that they may go for an acquisition...if they don't find any worthy one, they would increase dividend out of Rs 20/- earned(currently Rs 4/- approx. is dividend). from the latest happening, it could be that they have decided to go on for acquisition.

they don't find any worthy one, they would increase dividend out of Rs 20/- earned(currently Rs 4/- approx. is dividend). from the latest happening, it could be that they have decided to go on for acquis

what about dilution, and i also feel right now its a one trick pony company , as female condom saving grace for the company

Retail condoms business is very competitive and not really value accretive. We recently met ttk management and they are losing money for last three years. Durex took away the contract and they had huge capacities and they have lots of losses due to high op leverage.

They said that even manforce is losing money and it is because of two reasons, manforce gets its products from china and just distributes it. But the cost of advertising using Sunny Leone is too much.

Manforce is one of the best at distribution and you can find the condoms i every corner of the country because of the expert distribution of mankind.

The retail confom business is not value accretive unless you are at the premium end or you have the volumes at the mass market end. Cupid has neither which even cupid management agreed. I am surprised they are really foraying into retail at this moment

B2C retail female condoms is yet to see much traction because it is a very new product. My view is that there is no clear cut target market here. Who will use it? A typical housewive uses pills. Youngsters use male condoms.

Why would a girl or a woman use female condom? From our discussion with management a typical male in africa is not always happy to wear condoms. Females and sex workers insist on using a female condom to safeguard themselves.

Will a typical india sex worker use it at say 25 bucks a piece, i have my doubts. Will other kids use it again i have my doubts,. So i dont think it is going to be a big game changer

@Cupid shareholders,Considering the fact karex is making 5bn pieces, cupid is way behind.Any idea why they haven't yet ventured into other geographies (US, UK) with their own brand (or) through contract manufacturing for male condom ?

Agree with you. I had spoken to few doctor friends about adaptability of female condoms cand they said it's not as easy as using male condom n hence adaptability is a problem .currently , do not see potential beyond red light markets n tes their pricing can't be premium but a change in technology leading to ease of use can do wonders